Field Inspection in the Tax Allowance Application Process

Corporate taxpayers who wish to take advantage of the tax allowance facility must meet the specified requirements and apply. The explanation of the requirements for obtaining a tax allowance has been described in the previous article.

Then, if the corporate taxpayer has applied for the use of the tax allowance facility through the online single submission (OSS) system, the next stage that must be passed is the field inspection process.

In general, the provisions for field inspection in the tax allowance application process are contained in the Minister of Finance Regulation No. 96/PMK.010/2020 concerning Amendments to the Regulation of the Minister of Finance No. 11/PMK.010/2020 concerning the Implementation of Government Regulation No. 78 of 2019 concerning Income Tax Facilities for Investment in Certain Business Fields and/or in Certain Regions ( PMK 96/2020 ).

However, PMK 96/2020 does not explicitly mention the definition of field inspection. The definition of field inspection can be found in Article 1 point 3 of the Regulation of the Minister of Finance No. 17/PMK.03/2013 concerning Audit Procedures which was last amended by Regulation of the Minister of Finance No. 18/PMK.03/2021 ( PMK 17/2013 in conjunction with PMK 18/2021 ).

Referring to the regulation, a field inspection can be understood as an inspection carried out at the residence or domicile of the taxpayer, the place of business activity or the taxpayer’s free work, and/or other places deemed necessary by the tax auditor.

Furthermore, according to Article 10 paragraph (1) of PMK 96/2020, the utilization of the tax allowance facility is determined based on the results of a field inspection conducted by the director-general of taxes. The field inspection activities referred to are carried out after the Director-General of Taxes receives an application for the use of the PPh facility through the OSS system.

Referring to Article 10 paragraph (3) of PMK 96/2020, the field inspection process is carried out within a maximum period of 45 working days since the notification of the audit is submitted to the taxpayer, representative, proxy, or employee of the taxpayer.

The field inspection process includes 4 activities as regulated in Article 10 paragraph (5) of PMK 96/2020 as follows. The first, is the determination of when to start commercial production.

For information, the start of commercial production is the first time the products or services from the main business activities are sold or delivered or are used alone for further production processes. This definition refers to Article 1 number 7 of PMK 96/2020.

Second, testing the suitability of the criteria and requirements to obtain a tax allowance as stated in PP no. 78 of 2019 concerning Income Tax Facilities for Investment in Certain Business Fields and/or in Certain Regions ( PP 78/2019 ). In checking the suitability of these criteria and requirements, the Director-General of Taxes may request a letter of recommendation from the ministry or institution that supervises the taxpayer sector.

Third, calculate the total value of tangible fixed assets used for main business activities. The total value of tangible fixed assets determined based on the results of this field inspection will later become the basis for calculating the net income reduction facility. Fourth, testing the fulfillment of the provisions regarding the time of applying for the tax allowance facility .

If the four field inspection activities above have been carried out in their entirety, the Director-General of Taxes may issue a decision on the utilization of the tax allowance facility. In addition, the Director-General of Taxes can also determine the value of tangible fixed assets which is the basis for calculating net income. The authority of the director-general of taxes is by the provisions of Article 10 paragraph (9) of PMK 96/2020.

In addition, based on Article 10 paragraph (10) of PMK 96/2020, for details on the procedures for field inspections, it is carried out by the regulation of the minister of finance which regulates the procedures for inspection, namely PMK 17/2013 in conjunction with PMK 18/2021.

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